all right. we are back. a final check on the markets for you. we are down 26 on the dow.

down 5 1/2 on the nas and down 5 in the s&p. >> good to be reunited again. time now for "the call." >> good morning and welcome to "the call," i'm trish regan. 90 minutes into trading, the mark moving lower, the dow off 97 points as investors digest the latest read on the health of the consume are. we're going to talk about the consumer coming up and where exactly it's heading in terms of its sentiment and what that means for your portfolio. morning, larry. >> morning. kay shiller housing went up in may. that's the first time since the revolutionary war. and in another call exclusive, the ceo of teva will join us to talk about his companies' earnings. >> and i'm melissa francis, the commodities trading commission in a reversal from the bush administration is now blaming price oil surge on speculators.

this is "the call" on cnbc. stocks struggling a bit lower this morning. pressured by another weak consumer confidence report. yesterday's new home sales already forgotten. right now, the dow trading lower, down 35 points on the day. 972 the last trade 4/10 of a percent. 975.94 and the nasdaq down by 4/10 of a percent. trish, what's the move like on the floor today? >> you said it. people kind of have a short memory. basically, we're off 34, despite that very encouraging news from kay shiller. and i actually didn't realize that. larry had pointed out that it was the first time we saw that kind of uptick from what, years and years and years ago. so i didn't realize it was that long. we'll have to get more information from a historical perspective from larry on that. but definitely, you know, people basically taking into consideration that the consumer is being weighed down by the

economy, by the lack of jobs out there, and that's affecting the market right now. i want to write in bob pi ansi who is very busy talking right now. i don't know if quick get him. bob? bob? he's telling me to wait. but it comes down to the consumer. this is a market to keep in mind, basically has seen a lot of up sides in the last couple of weeks. just last week, we were up about 4%. some people taking some profits off the table. and i believe now he sauntered over. are you -- >> here i am. >> are you ready now? >> we're all doing things here a lot of things going on here. >> good to see you. basically, i was just explaining this consumer issue is something hanging on market. not that much, we should keep it in perspective, down only 37. but deductible a shift from the home number. here is a disappointment. may had a big peak in consumer sentiment. and the numbers have been slightly down since then. the argument is it doesn't mean that much, that consumer sentiment does not correlate with consumer spending.

they say one thing and do another thing. but still, a little disappointment. the market clearly reacted. with that said, you see how resillient it is? a lot of the big industrial stocks are doing a little bit better. ge, united technologietechnolog stocks have been very resilient recently, and the market trend has been amazing the last several weeks. the stocks don't generally want to go down. we have put in higher lows, 11 straight days in the s&p 500, that's a very unusual pattern. where every day the s&p low is higher the next day. that's a sign of powerful moment mum, and the sign of the stock market -- the signs that the stock market doesn't want to go down. finally, i just note that the home builders on the kay shiller numbers have been holding up pretty well today. masco, a big supplier company had positive comments here. on the kay shilling numbers. which are showing some signs of stabilization. i don't want to make too much about it. >> let's not forget, we did see

positive housing numbers yesterday, too, so the two combined in a row certainly boding well for stocks. bob pisani, so glad you could join us. >> we have breaking news right now from scott cohn. breaking news on allen stanford. >> that's right, trish. this report obtained by cnbc under the freedom of information act, the internal report of the s.e.c. looking into how the matter was handled of allen stanford and the alleged $8 billion ponzi scheme. the inspector general who has been very independent throughout these financial scandals says the agency did not reach its obligation to vigorously pursue the case, but the urgency increased after bernie madoff confessed to his ponzi scheme in september. but this report raises questions, as well. the report says that the s.e.c. effectively halted its investigation last year after bringing in department of justice to assist in the case, and essentially lead the way. and that the s.e.c. halted its

investigation at the request of department of justice. this is something that has ran ankled the alleged victims, although very common in cases like this, where the s.e.c. basically runs out of tools to pursue the case, and that seems to be what they did. and we should point out that the inspector general did not interview anyone from department of justice in this case. nonetheless, the s.e.c. apparently after the madoff scandal came to light told the doj it could not hold its investigation in abeyance anymore. they filed suit against stanford in february, and the doj didn't come in with indictments until june. a spokesman for department of justice says the department of justice worked cooperatively with the securities and exchange commission and defended the agency's conduct in this case. and a lot of this is fairly common in criminal and civil investigations. nonetheless, of no comfort to stanford's many alleged victims. larry? >> all right. thanks very much, scott. now let's go to washington for some more breaking news from cnbc's diana olick. diana, this could be big.

>> larry, senate democrat ken conrad is fighting back against shall we say refreshed allegations that he and fellow democratic senator christopher dodd got sweetheart deals from countrywide financial on their personal mortgages. take a listen to what conrad had to say. >> i was never told that they waived a point on my mortgage. in fact, mr. feinberg told the wilmington newspaper last year that he did not tell me. so why he has changed his story, i don't know. but he clearly has. he's contradicted himself. the simple truth is, he did not tell me. i have done nothing wrong. i will make my case to the ethics committee, and i am confident that there will be a good outcome. >> now, this all stems from a confidential interview with the senate ethics committee and robert feinberg, who was a former countrywide executive. according to "the washington

post," they interviewed the executive, and he said he worked as a loan officer and what conrad and dodd are saying stand in quote, direct correction to statements before they maintained they did not know they were part of the countrywide program. he is now saying they did know about this program. they did know about the sweetheart deal that former executive, there anglo mozilo had given to high-ranking officials. the beat goes on. >> had christopher dodd made any public statements because feinberg's testimony directly contradicted dodd's denial. >> he hasn't come out yet, but who knows, the day is still young. >> appreciate it. let's go back to the economy. consumer confidence slipping a bit in july, hampered by a difficult job market, second straight month. but other news is very strong on the case-shiller home prices and the richmond fed manufacturing report. joining us to discuss, maria ramirez, mfr president and ceo and michelle girard, rbs senior

economist. michelle girard, i want to just put up on the full screen the case-shiller, sequentially prices rose for the month of may. some people are saying it's the first time in three years. others are saying it's the first time since the u.s.-american revolutionary war -- there it is. look at that little guy. what do you make of it? it's got to be some good news, doesn't it? >> it is good news. i certainly think it confirms that we've suspended that prices are beginning to stabilize. i'm not sure we would go so far as to say we're on a rebound. but the housing has gotten better. we have seen it in terms of home sales and the balance of the new home sales department between supply and demand equalizing, which has even allowed construction activity in that sector to begin. and now we're getting confirmation even that the price declines are waiting. so it's really one of civilization, but, you know, for a sector that's been falling hard, and dragging down the

economy just not to have the drag from that sector in terms of growth and rates of change will be a big plus for the economy going forward. >> what's that worth in gdp? >> we basically have residential construction flattening out. and from subtracting 1 to 2% off growth, that's a significant, you know, sing as we look ahead over the next yeesh. of that is going to help push growth back in positive territory. >> maria, i mean, if you look at yesterday's data on new home sales and then you combine it with the case-shiller data today -- is it possible -- and i'm not saying we're going to see a sharp rebound, we're obviously not going to, but is it possible we put in a bottom in the housing market? >> i think you are in the process of bottoming out. there is no new construction to speak of. at some point, the sharp declines we see month after month have to stop. in the summer is really when more houses are sold. so i would expect that after this summer momentum, things will start slowing down again, because you have a lot of mortgages that come for recess,

and a lot of stuff that the arms are going to have a difficult time in getting rolled over. so i think there is going to be another slew of foreclosures, unfortunately, within the next six months. at some point, i think in the next 12 months, housing will start having some recovery. but from the people i talk to in various parts of the country, the credit is still tight. consumers still have to save a lot more than all the money that was spent in the last 20 years that dragged down savings. so the consumer is really stuck between a rock and a hard place. look at the consumer confidence numbers this morning. job outlook is continuing to worsen, and that's really what the key of the economy is. >> that's the other possibility. you know, maria, you said bottoming profits, which i don't really accept as an answer, so i'm going to say no on the housing bottom. michelle, what do you think about that? because that is the other theory that possibly what we're seeing here is a spurt at the end of summer. all of a sudden people feel like things aren't coming to a screeching halt in the economy,

we're not falling off a cliff. a lot of people need to move to start the newel school year somewhere else, the warm weather brings out buyers. that's the flip side of the coin. >> of course, there is talk about pull-forward activity ahead of that. tax credit, you know, for first time home buyers. there has been talk of that, as well. but i think one of the things here that's crucial is if the economy continues to gather, to, you know, find a bottom and begin to expand later this year, and income levels begin to rise as job growth begins to resume, then home prices even staying flat will continue to look cheaper, you know, by historical measures versus income and other measures. and in that sense, i think the case for housing will continue to strengthen. and, you know, as i said earlier, we are not expecting that the housing sector is going to rebound sharply in the near term. it is more sore of a bottoming out. but all of the right things are happening in a sector, as i said, that has really been a drag on the overall economy. but i agree with what maria is

saying. our forecast does expect -- we do expect to see job growth and income growth improving by the end of the year, and that is going to be an important aspect to keeping this housing on the sector toward recovery. >> maria, just quickly. ben bernanke on his national speaking tour for re-election is saying 1% gdp in the second half of the year. it sounds like you guys, however, think it could be stronger than 1%. and charles plauser, the head of the philadelphia fed said the fed may have to tighten and raise rates sooner rather than later. what are your thoughts? >> on the contrary, larry, we have been of the view that the recovery wouldn't happen the second half of this year, but maybe some in the second half of next year. and a lot of the clients and people we talk to, they finally are starting to agree with us that there is no recovery coming in the second half of this year. so i think it sounds really g but the reality is, look at the confidence numbers in terms of job outlook. if we don't have wage growth, if we don't have income growth, it's going to be very difficult for the consumer, which is still

the bulk of where economic growth comes from to contribute possibly in the second half of this year or in the first half of next year. so the bottom line is, we look for some modest growth, maybe half or 1 percent for 2010, not 2009. >> all right. maria, michelle, we've got to leave it there. thanks for joining us. >> michelle thinks stronger. you can tell by her face and body language -- she thinks it's going to be much stronger. sorry. >> we have a quick programming report, a special edition of "cnbc reports" realty check airs tonight, 8:00 p.m. central time. and we'll be talking about is it possible the housing market has bottomed? where do we stand in that mess? coming up, second quarter earnings coming out every day for the major oil producers. we'll tell you how to profit ahead of those numbers. >> but first, teva pharmaceutical trading higher despite posting a small drop in second quarter profits. we're joined live from tel aviv in a cnbc exclusive happening

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welcome back. teva pharmaceutical, the world's largest drug maker reporting a slight decline in quarterly profits but still beat wall street estimates. it also predicted how far pharmaceuticals would yield better than expected results. take a look at where the stock is trading right now, up about 78, a gain of almost 3 1/2%. joining us live from tel aviv,

thank you for being on the program today. congratulations on better than expected earnings here. >> thank you. good morning. >> let's talk a little bit about sore of the company's objectives going forward. in other words, how to grow a business, how to increase -- increase this business during a time when the economy is clearly challenged and at a time when politically the landscape is very challenging. teva has always been a big -- a big acquirer of other companies. is that a trend that you anticipate continuing, and if so, what are you looking at? >> well, first we believe that we are in a market where the potential to grow generics is very high. viewed to be a compelling idea of generics, especially in this troubling times when we come with the very basic notion.

in addition to that, this is about our worldwide organic activities in order to grow the business. and, yes, we just finalized a very successful acquisition -- that we announced exactly one year ago. >> uh-huh. and are you looking at anything else at this point in time? >> we are scrutinizing all potential targets. but generally, this is about finding something, we are are a very strategically disciplined company, and we have two basic criteria for potential acquisitions. >> i know milo is one that is a potential acquisition. would this fit into your profile? >> it should fit to our strategic long-term strategy, which is basically, if i would

say, our balance business model, which is about 75% generics, and 25% brand of the business. and we are also very balanced geographically-wise, multiple businesses in the united states, of course, but we are also becoming a major interactor in europe and the international market u as well. >> let me ask you here about so some news that has very much been in the news of late. michael jackson, of course, propofol was the drug that is said to have potentially have killed him. that is a drug that your company, in fact, makes. two weeks ago, teva announced it was voluntarily recalling quite a bit of this drug, because of its bacterial contamination that in fact the company thought could be fatal. do you believe that there was any potential that, in fact, michael jackson's death could have been linked to potentially

the propofol that was, in fact, contaminated with this bacteria? >> teva has absolutely nothing to do with it. we are -- immediately after we got this kind of information, and we checked, and teva, again, has nothing to do with this. >> do you -- are you concerned at all that the jackson family may sue teva, because of this issue? >> well, but we -- again, we have nothing to do with it. we are producing it, but as far as we know, what has been found there is not -- that batch that we recalled. >> so you're absolutely certain then that this particular lot that michael jackson may have injested, in fact, was not the lot that was contaminated with the bacteria. >> absolutely. >> okay. all right. we have to leave it there.

thank you so much for joining us today. live from tel aviv. we appreciate it. good luck to you. all right. when we come back, what you need to know about this morning's earnings round-up and it's a huge week for big oil. find out how to play that sector right now. >> plus, oil traders are under fire, and the push to ban speculators is now making a comeback. details on the legislation that could shake up the energy markets are coming up, only here on "the call." when this hotel added aflac

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all right. it's a big week for oil earnings. bp and bolea out this morning, and chevron out later in the week. rebecca jarvis is here with earnings central as we watch crude oil down about a buck 50 on the day. this is going to be a tough quarter. >> it has been. >> comparisons -- >> from comparison standpoint, melissa, you know the drill. as far as oil prices are concerned, obviously, that plays into how these companies report their earnings. if you take a look at our earnings central, plasma right here, we'll show you a chart on it of bolero down on today's session. they came out ahead of time told us things weren't looking great. t still 4% to the down side. they're an oil refiner and reported a 48 cent a share loss in stark contrast to last year at this time. bow lettero made $1.37 last year

at this time. >> it was hit with a double whammy, on the cost side of their business, they rose over the quarter. if we show you the oil price, you can really see it in the charts. they rose over the quarter on the demand side of their business appetites for diesel fuel. you see here, this price is what they use as their input cost over at valero and then refine it into gasoline. and that really hit them. now, over at bp, their q2 profits were down significantly from last year. they plunged 53%, stock getting hit today, in a slightly different position than valero. bp also does exploration and production and that makes money when oil prices go up. as a result, they were hit by the fact that oil prices were relatively weak by comparison to last wreer. you see here, this is bp -- uses brent crude of the london british kind and you see last year, things were looking very good for their business, because crude prices were averaging 121

bucks a barrel. now it's like 59 bucks a barrel. bf's chief exec doesn't want a lot of government involvement. >> i think transition sensors are appropriate for new technologies, but they need to be very carefully focused and it needs to be clear they will disappear. what we can't have is industries becoming dependent on government support. >> hayward also expects demand to remain sluggish in the near-term. he told investors he sees sign of stabilization, but stabilization has been this magic word, things as usual. >> in an interview with tony in the past, this is a difficult business right now obviously, because input costs, unlike the refiners stays static. he knows what it's going to cost him for all his rigs, but at the same time, you have the price of oil going up and down and has a huge impact on his earnings. we were punishing these people a year ago when they were making huge profits and now no one feels sorry for them. >> that's a good point, melissa. >> all right.

more big oil reports coming out this week. larry has more on that. >> all right. got to run down tomorrow. conocophillips thursday, exxonmobil and friday, chevron all before the bell reports. and the question is how do you play the big oil earnings story. dan dicker, independent oil trader and contributor at the street.com. and president kerr president and chief trading officer of kerr trade international. hello. what's the price on the story? economic expectations are rising, does that mean oil prices are going up, or is there oversupply and they're going down? is that a factor in the earnings outlook? >> well, there is no question they depend a great deal on at least the integrated do a great deal on oil price for their bottom line. but it's never been a very good proxy. the integrated, in terms of their stock price. so as a trade, you know, i'm not sure whether bp and their earnings reports for this quarter compared to the previous year. they were awful. but i'm not sure that's going to impact the stock price very much in the long haul, although today it is getting hammered.

>> kevin, isn't it the exact time you want to jump in and buy your favorite names in the sector? it's not like we're going to stop using fossil fuel. these prices are going to spike again when the economy comes back. right now, everyone has a short memory. no one is buying gasoline, you know, if you look at where everything is trading. what would be your pick right now if you were going to try and make that play? >> well, you're absolutely right, melissa. we have to look at the glass as half empty right now. and look at the opportunities. look at some of these large names that you can buy at bargain prices right now. chevron, exxon, bp reporting today. you know, look at some of the positive numbers that came out of there, production is up, the refineries in texas are functioning better now. sure, e were down, but everybody expected that and earnings were higher than expected. so we have to look at this as an opportunity. >> you would buy those stocks today. >> i would, absolutely. >> dan, you like chesapeake and an adarko. >> yeah. >> tell us why. >> right now, if you want impact into the commodities sector with the stocks, you've got to look

at the e and p stocks and natural gas. and they're all going to report this week they're getting hammered on the back of the integrated reports coming out that will be bad. i think the natural gas reports coming from chesapeake, annadarko and apache, it's going up 50% over the next four months. that's not a prediction. it's trading there on the curve now. >> dan, i thought there was a massive glut of natural gas. explain to me. and, you know some of this is because of the expectations that have worked out well. why do you think the price is going to firm so much? >> because first of all, it's not a prediction. the curve is already telling you, we're trading $3.5 million in august, but trading well over $5 in december. so the nominal price is going up. that we already know. nothing needs to happen for the nominal price to go up, and the stocks will react to that, number one. and number two, you're right about the supply. it is huge. but things can't get much worse. and that's sort of the trader point of view from this. these stocks have been beaten

down so miserably over the course of the last year, that these may be levels at which you want to be starting to get into these. >> okay. we're going to leave it there, guys. thanks so much for joining us. trish. >> when we come back, the details from general electric's investor day web casts. plus, is ge a stock you want to buy, sell or hold right now, larry? >> and the oil speculation blame game seems to be making a comeback. we have senator barry sanders to join us live for his push to ban certain oil trades. it's a first on cnbc interview coming up only here on "the call." oh, my gosh, speculators.

welcome back. general electric, the parent of this network, says conditions are improving at ge capital, but bad loans will linger. analysts are concerned that new regulations proposed by the obama administration will force ge to spinoff capital, and provide additional money to keep it viable. ge responding by saying no proposal is losing steam in conference. look where the stock is trading right now. $12.48 a share, the laidest trade. cnbc's mary thompson has more. >> all of this coming of course on a conference call about ge capital held earlier today. ge's finance unit expecting losses in its portfolio in 2010 to be similar to those in 2009. ge capital is forecast to earn 2 to $2.5 billion this year. the company forecast 2010 earnings for the unit. on the two-and-a-half hour conference call, executives at the finance arm saying ge's

capital credit card operations are performing well. uk mortgage, commercial lending and leases as well as global banking are steady in this environment with its $84 billion commercial real estate portfolio still challenging. over the last weeks, stock has dropped on concerns over how the finance arm has reserved potential losses and how it's valued its assets. today will provide more transparency to investors. in responding to questions about when the company expects its loan loss provisions to peak, overall see that in mid 2002. within the u.s. consumer unit, early 2010. in uk mortgage, 2010, and commercial lending and leasing, early to mid 2010. also, the company cfo, steve share ron saying the company does not expect to put anymore capital this year or next under an income maintenance agreement. but in 2011, he says an infusion of 2 to $7 billion might be necessary, depending on the economic conditions. talking about those proposals

that have been sent to congress to regular late systematically important finance companies, ge has said it has heard support for grandfathering some terms are not breaking up their existing structure. that might apply to ge, because there is concern for those -- ge might have to spinoff or sell ge capital. but ge continues to say it is committed to its current business model, though as we all know by now, it is shrinking ge capital. once 50% of the company's earnings is expected in the future to account for 30% of ge's earnings. back to you. >> mary thompson, thank you so much. stay with us. we want to talk more about ge, ge capital hanging really over the company. so is the stock worth owning right now? joining us we have jack rutherses, chief investment officer at harvard rise re portsmouth which holds ge widely across its client portfolios. mary is still with us. jack, what do you say -- i mean, i know you've said that you would actually hold this stock for three years, and you think

if you held it for three years, you would double your money. but when it comes to the here and now, you're neutral. what's your biggest concern about ge right now? >> the biggest concern continues, trish, to be the real estate portfolio. i was on the conference call this morning, and they point out that there are $5 billion in unrealized losses there. which they expect to absorb through earnings over the next three years. if, in fact, the commercial real estate market gets more challenging, which we expect, then that -- that unrealized loss could overwhelm earnings, and they would have to start taking impairment charges. >> but hasn't that been factored in to a certain extent, jack, with the stock price already that there is more deterioration to come in the commercial loan market? >> well, we think so. and that's why we're projecting that a buyer here would do well over a three-year time frame, possibly see a double in the shares. but there is short-term risk to

that. a further weakening in the economy would probably drive the stock into the high single digits. >> jack, what about the financing side of this calculus? ge is saying it's going to get rid of the government guarantees for its funding. how is that going to affect its financing costs and its carrying charges for these loans? >> good question, larry. you focused on the part that i think was the most positive part of the call. and that is how they have restructured their funding sources over the last six to nine months. and they have done a great job there. they're now weaning themselves off the temporary loan guarantee program which i think will go a long way to easing the regulatory concerns. but they are shrinking the balance sheet at ge capital much faster than expected at the last deep dive meeting which is the reason i think the shares were up today. >> finally, let me throw this one at mary thompson who is still with us here. mary, what's so wrong with spinning off ge capital to begin

with? if you were able to spin that off and basically get rid of a lot of liabilities and concerns about the commercial loan market, what would that mean for the company? >> well, i think, you know, first of all, a lot of people were asking why they hadn't done it sooner, before this credit cycle hit. that was just one question. but, again, ge appears to be committed to having this. it's, of course, an important part of earnings and wants to may want the structure of how this happens. you know, a couple years ago or so, some people might push forward. at this point, you might have a tough time trying to find a buyer -- >> isn't there a revenue issue? ge capital revenue, isn't that a gigantic part of ge revenues? >> but it's become smaller and smaller. >> how much smaller? i mean -- spinning it off sounds good on paper, but what does that mean to their cash flow, and ultimately if they ever get any earnings? >> and especially if it recovers. it's a difficult credit cycle right now. obviously, ge capital is feeling the impact. but again, it is very important driver of -- as larry said, it's

cash flow revenue, and ultimately its earnings in a better environment. >> okay, real quick. jack, did you have anything else to add on that? >> i think the part of ge capital which is critical to the business is the commercial leasing and lending component, which allows them to more easily sell their very expensive products. and that piece is key to the sales effort on the industrial side. >> okay, thanks so much. great to see you, jack. thanks, mary thompson. >> thanks for having me. >> up next, senator bernie sanders on his renewed push to end oil speculation in the energy markets. he is joining us live in a first on cnbc interview. this is before he is testifying on this issue this afternoon. >> plus, let no good issue go undebated. we'll discuss whether the senator is right. should oil speculation be outyou la outlawed? that's next only here on "the call."

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year's decision that oil speculators are not to blame for the price volatility. the agency kicks off a series of hearings to weigh the issue. that starting this afternoon. in the meantime, the oil volatility index is down about 50% year-to-date. but some are still convinced that speculation is harmful. joining us in a first on cnbc interview to discuss the proposed legislation against speculators is independent vermont senator bernie sanders. senator, thanks for joining us today. what is it that you're going to tell the cftc today. give us your best argument. >> what i already told them is that at a time when oil inventory is at an all-time high, and demand is at a ten-year low, it seems a little bit strange that in recent months, we have seen a huge increase in the price of oil and gas. it seems to me that what this tells us is that we're not looking at supply and demand, what we're looking at, and i think the record is very clear on this, is the role that excessive speculation on the part of goldman sachs and other

speculators are playing in driving up the price of oil futures. >> senator -- >> let me talk about your first argument, first, because you're seeing we have seen the price of oil go up recently. that's a futures market. so they're betting that the future price is going to be higher, and, in fact, you know, if the economy does recover at all in the second half of this year, there is going to be more demand than there is right now. so it does seem like that is in line with what people think is going to happen. >> no. whatever people may or may not think is going to happen is one thing. but the reality is that right now, you have a record amount of supply, demand in reality is at a ten-year low, according to the basic economic principles of supply and demand, prices should be lower. and yet they went up for a significant period of time. but you don't have to believe me. i know that larry loves the oil companies, i don't. but this is what -- >> i'm just -- free markets. >> here is what shell president john hofmeister said on may 21st. when the price of oil was over

$132 a barrel, he said that the proper price of oil, based on the fundamentals of supply and demand was somewhere between 35 and $65 a barrel. 50%. >> he's entitled to his opinion. we've had analysts on this program and on the network. the range is $20 to $150. so i don't think you can really single out -- and i want to go back to the key point here. expectations of the future economy tend to drive commodity prices. you can't take a snapshot of today, because that's only yesterday. people are looking ahead, senator. and that's what the british have just said. they conducted their own study, and they said, you know, swings in in oil prices are easily explained by confused and uncertain economic expectations. what's with that view? what's wrong with that view? >> what's wrong with that view is that when most people believe should happen, and what i thought you as a proponent of free ber enterprise thinks

should happen is when there is a lot of supply and limited demand, there is consumer benefits. >> because people say demands may rise substantially. >> larry -- >> let's go to somebody like boone pickens. >> larry, what that is called is peck legislation. >> well, no -- >> what that is called is what got us into this disaster in the first place, and wall street has caused a major recession, because they get involved in bubble economics. >> senator, let's look at the other side of the argument here. of course, part of this at least was caused by speculation. but the -- >> substantial part. >> but doesn't a speculator serve a purpose in this market? a speculator allows somebody like southwest airlines to get into the market and hedge their bet on where fuel prices are headed. say they want to protect themselves against it going substantially higher or lower. someone has to take the other side of the bet. that person makes a market and that person is a speculator much they're not a commercial user. they're the one that is willing to go in and take the risk so the consumer can benefit from steady prices in, you know,

airlines or whatever else -- >> just told us a minute ago that there are no steady prices. what we're seeing is incredible volatility. >> and they're protecting themselves against the volatility. what about the argument that it's used as a hedge. >> well, i think what you're looking at is that the amount of money in oils futures are not coming from the airlines or the truckers or the fuel dealers who actually use the oil. >> absolutely. >> what you are seeing is from speculators who have only one purpose in life, to make as much money as they can. i think the really is, we are in the worst recession since the great depression, precisely because of the speculative -- excessive speculative -- of goldman sachs, et cetera. we don't need anymore of that. we've got to stop. >> blaming goldman sachs, interesting position, senator. we may be leaving the recession, and moving into a recovery. >> let's hope we are. >> but i want to ask you a final question. why shouldn't smaller investors have a chance to play and invest in the commodity markets, including energy, through exchange-traded index funds? a lot of people are blaming the

index funds. but the index funds give small investors, little mom and pop -- >> larry, i'm glad -- goldman sachs and morgan chase are not exactly all investments. >> i'm saying there is another source. it's not just the traders. it's the -- >> etfs. >> the bottom line is -- >> the index funds have become larger players, and a lot of people blame them. i'm saying, why blame them? doesn't that make it a more liquid market, and doesn't that open it up to small mom and pop investors? >> i've told you what i think. and i think excessive speculation has been ruinous to this economy in recent years, and the commodities future trading commission has got to put a stop to it. >> and so you want to eliminate it all together? >> i didn't say that. i said excessive speculation. >> how do you decide what is excessive? >> i can't decide -- >> no, it's a serious question. how do you decide that, do you think? >> i think when you have a lion's share of the market opened by people who don't use the oil, you are talking about excessive speculation.

>> okay. we've got to leave it there, senator. thanks so much for joining us. we appreciate it. >> thank you. okay. "power lunch" coming up at the top of the hour much bill griffith. hey, there. >> how entertaining was that, bernie sanders versus larry kudlow. i love that. that conversation. by the way -- >> i don't know if you can top that one. >> oh, and melissa was in on that, too. i got all that. that was entertaining too, melissa. we'll be furthering that discussion with the ceo of the cme group to talk about the limitations on speculation in the oil markets and whether that is even necessary right now. also, a fascinating debate that we're starting to detect. we may be a little early on this. but i think we'll be hearing more about this in the future. do we, in order to grow our economy, need to reemphasize manufacturing right now? in other words, do we need to make more stuff and not just make profits? we have two very interesting people to debate that issue for you coming up. and then of course we'll ask the question we're all asking after the housing numbers are out much

has housing in fact hit a bottom? see you on "power lunch." >> i'm just here for decoration. i don't know whatkudlow versus the senator? i'm really bugged. >> me thinks you doth protest too much. >> i just -- >> kind of going out to senator sanders. >> i just want to say that, i e-mail with him all of the time. i totally disagree with him, but i do respect his views. >> all right. let's see if you're still friends, larry. we're going to take a quick break. >> always been friends. all this time. >> and the ceo of group one automotive joins us live on a first on cnbc interview. >> and the dealership exchanges profit is down but not out. are they ready to call a turn-around in the u.s. auto industry? find out next, only on "the call." senator bernie sanders is a friend of mine. announcer: some people buy a car based on the deal they get.

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welcome back. group one automotive posting a drop in second quarter profits. but the automobile retailer issued a strong 2009 outlook above the street's expectations, citing stabilization. what do you know, stabilization in the auto market. shares down more than 5% right now, 2701. joining us right now in a first on cnbc entire view, we have group one president and ceo, earl hessenberg. great to see you, earl. >> hello. >> okay. trading down 5%, despite a

rather positive outlook for 2009. is this really based simply on the fact that the earnings for this quarter were not what some had had wanted? >> well, actually, we were more than 10 cents above analysts' expectations, so i don't know exactly how the market moves on any given day. but i think you'll see that our stock has made a strong move upward this year. >> it certainly has. i mean, up 164% year-to-date. and yet -- and yet you have seven gm stores, and eight chrysler stores. how is it that you've seen this kind of upside, given the fact that you are heavily exposed to gm and chrysler? >> well, i would have to say, our results are driven by cost cuts. we took about $44 million out for the quarter, we're targeting $120 million out of our cost structure for the full year. and that's driven most of our profitable so far this year. so it certainly hasn't been due to any strength in new vehicle sales. >> you're talking about

stabilization within the auto sector. where is that stabilization going to come from? are we going to see a resurgence of the american consumer? >> well, i wouldn't go quite that far yet. we've bounced along in a fairly steady sales range so far this year. i think sales of have averaged about 9.6 million in the first half. and we expect the second half to be a bit better. and in the near term, i'm sure you're aware of this cash for clunkers government program which seems to already in the first weekend of its existence lifted sales a bit. >> so what are your thoughts on that? do you think it's going to work, or do you think it needs to go a bit further? >> i'm sure it will work. there is no doubt. i believe it's budgeted for about 250,000 sales, and i think we'll probably go through that money more quickly than most people think. >> and what does that mean for your company? >> well, it's good for our company. we're almost 35% toyota. 14% honda. and those brands typically benefit from this type of program. ford, we're a little less than 10% of our business. so those are the brands that

typically benefit from this type of program. >> okay. we're out of time, sir. we're going to have to leave it there, but we appreciate you joining us today. thanks so much, earl. >> you're welcome. >> larry. by the way, the cash for clun kerr thing could be pulling future sales into the present. i don't know that it's going to work. we're going to be right back for the last call. >> and a little bit more on bernie sanders' versus speculators. the e-mails are coming in. keep them coming, we are reading them. we'll be right back. medicare.

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